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Access to premium content on mobile television platforms: The case of mobile sports
Telematics and Informatics 28 (2011) 32–39
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Access to premium content on mobile television platforms: The case of mobile sports Tom Evens a,*, Katrien Lefever b, Peggy Valcke b, Dimitri Schuurman a, Lieven De Marez a a
Interdisciplinary Institute for Broadband Technology, Centre for Media and ICT (IBBT – MICT), Ghent University, Korte Meer 7-9-11, 9000 Gent, Belgium Interdisciplinary Institute for Broadband Technology, Interdisciplinary Centre for Law and ICT (IBBT – ICRI), Katholieke Universiteit Leuven, Sint-Michielsstraat 6, 3000 Leuven, Belgium
b
a r t i c l e
i n f o
Article history: Received 3 June 2009 Received in revised form 17 November 2009 Accepted 18 May 2010
Keywords: Mobile TV Business model Bundling Content regulation Access Sports
a b s t r a c t As broadcasting sports content has proved to be a popular strategy for driving the growth of the digital premium content marketplace in the past, mobile service operators aim to enter the sports rights market. However, as the markets for live sports broadcasting are still dominated by established broadcasters, mobile network operators are facing significant barriers to access premium content creating bottlenecks in the construction of business models. Therefore, content regulation is seen as essential for the development of mobile television platforms. This article aims to stress the strategic importance of content in the development of sustainable business models for mobile broadcasting services and will discuss the implications of bundling strategies and regulations for the viability of these emerging platforms. Ó 2010 Elsevier Ltd. All rights reserved.
1. Mobile television in the convergence spiral Bringing together two powerful socio-technological developments – enhanced end-user mobility and new kinds of access to media content – mobile digital television is probably among the most prominent technologies that ended up in the convergence spiral of today’s ICT environment (Ahonen and O’Reilly, 2007). Since mobile network operators are facing decreasing average revenue per user due to intensified competition, the entrance of low-usage consumers and regulatory interventions (e.g. termination tariffs and roaming fees restrictions), mobile service providers are seeing revenue opportunities in mobile television propositions (Andersson, 2005; Gruber, 2005; Orgad, 2006; van den Dam, 2006). These developments may affect traditional viewing practices towards a more personalised user experience including the consumption of on-demand mobile content. Moreover, mobile broadcasting technologies challenge established business models by providing an innovative distribution mechanism for content delivery. Consequently, new audiences can be reached while the traditional evening peak time audience can be targeted at other times of the day (Feldmann, 2005; Södergård, 2003; Urban, 2007). Mobile consumer services have not only been granted a crucial role in the further development of the information society (e.g. eEurope 2005 and i2010 action plans), the European Commission also considers mobile broadcasting as a tremendous opportunity to expand Europe’s leadership in mobile technology and to strengthen the internal market for audiovisual services (CEC, 2007b). In order to establish a vibrant ecosystem for mobile television services, the European e-Communications policy has identified three key factors for the industry’s successful market development: (1) technical aspects such as * Corresponding author. Tel.: +32 09 264 68 83. E-mail addresses: [email protected] (T. Evens), [email protected] (K. Lefever), [email protected] (P. Valcke), [email protected] (D. Schuurman), [email protected] (L.D. Marez). 0736-5853/$ - see front matter Ó 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.tele.2010.05.004
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network interoperability and common transmission standards, (2) a favourable regulatory environment conducive to innovation and investment in mobile broadcasting services, and (3) radio spectrum capacity supporting qualitative mobile infrastructure. In addition, the Commission (CEC, 2007b, p. 8) has recognised that ‘‘the successful deployment and uptake of Mobile TV depends crucially on content availability”. As content has proven to be ‘king’ for many new media technologies in the past, it is assumed that premium content, in particular sportscasting, will drive mobile television services (Carlsson and Walden, 2007; Goldhammer, 2006; Orgad, 2009; Shin, 2006). The appeal of sports lies in its unexpected outcome and live experience that can be shared amongst viewers, which is especially the case with major sports events. However, the affordances of mobile television are not limited to major sports; mobile technologies also provide long tail opportunities for niche sports content through the establishment of premium niche sports channels. Furthermore, thanks to the integration of close-ups, player cams and multi-camera perspectives, viewers should be able to personalise their own mobile viewing experience. Finally, sports content provides opportunities for mobile betting revenues while watching sports games on the mobile (Schuurman et al., 2009). Consequently, experts had considered the 2008 sports summer, including the Beijing Olympics and the European Football Championships, as a crucial milestone for consumer uptake of mobile television services (Yun, 2008). Although these events granted a unique opportunity for raising consumer awareness, the predicted massive adoption of mobile television devices has not occurred (yet). Although the Commission has decided to set DVB-H as the mobile broadcasting standard and radio spectrum – released by switching off analogue terrestrial television signals – has been allocated to telecommunications companies for the roll-out of mobile television networks (e.g. in Finland and Italy), entry barriers for access to premium content may partly hamper mobile television’s further breakthrough. In addition to the bundled and tied sale of broadcasting rights, which helps incumbents to deploy effective entry-deterrent strategies, legal barriers (competition and media regulations) might foreclose effective competition in mobile television markets. Hence, this cross-disciplinary article will stress the strategic importance of content in the development of sustainable business models for mobile broadcasting services and will discuss the implications of bundling strategies and regulations for the viability of these emerging platforms.
2. Content issues in designing business models Although the emergence of digital technology has revolutionised the broadcasting ecosystem, the success of new consumer applications such as mobile television services will depend on multiple factors, which go far beyond the technological issues. As Braet and Ballon (2008) argue, the main design choices for framing mobile television business models to be addressed are not predominantly technological in nature, but rather related to the cross-impact of strategic cooperation and competition issues, market expectations and legacy situations. While these critical success factors seem confined to the macro level of supplier related issues, user-centred factors on the micro level are of the utmost importance. Failures of recent technologies such as WAP, DAB or CD-I and the ‘battle of standards’ for VCR (VHS versus Betamax) or the newest DVD-generation (HD-DVD versus Blu-ray) show that the availability of attractive content possibly becomes one of the most crucial factors that determine the success of a new technology (see Bouwman et al., 1994; Bouwman and Christoffersen, 1992; Imberti Dosi and Prario, 2005; Von Löhneysen and Wolff, 2004; Wallace, 1999). The adage ‘content is king’ thus still prevails, especially in an essentially top-down industry as television. Since mobile network operators have established mobile television platforms, the content issue is a major one to tackle while designing appropriate business models. Platforms can be regarded as central elements within the mobile industry architecture. Contrary to the merchant mode, in which intermediaries acquire (digital) goods from sellers and resell them to buyers, multi-sided platforms allow affiliated sellers to sell directly to buyers (Hagiu, 2007; Hagiu and Lee, 2009). While the technical outlook of platforms refers to a hardware configuration, an operating system and a software framework on which a number of services run, business models in platform markets aim to balance interests of all stakeholders to assess ‘‘a strategic fit” (Ballon, 2009). The content issue is typically at stake in multi-sided platform markets, characterised by the presence of distinct markets whose overall performance is derived from the coordination and subsidisation across these markets through a common platform. Consequently, platform owners mediating between content providers and consumers should address the celebrated ‘chicken-or-egg problem’ (Parker and Van Alstyne, 2005). Content producers are reluctant to invest in often expensive new content and applications when a substantial consumer base is not certain yet. Consumers on the other hand hesitate to adopt the new technology owing to the uncertainty about the availability of compelling content. If these two processes co-exist, content suppliers and consumers get stuck in a vicious circle leading to absence of network externalities and incentives for the further development of these platforms (Evans and Schmalensee, 2009). Hence, platform owners should devote much attention to business model design to break this circle by matching the expectations of all relevant stakeholders in order to make money (Rochet and Tirole, 2003). Although service design was often overlooked in earlier business model frameworks focussing on organisational and financial issues (e.g. Timmers, 1998), the strategic importance of content issues in business model design has been recognised by more recent conceptual frameworks. In particular, the STOF business model (see Fig. 1) discusses four interrelated design domains of business models for mobile services, i.e. the service, technology, organisation and finance domains (Bouwman et al., 2008; de Reuver and Haaker, 2009). Within the STOF model, the service domain describes the specific characteristics of the developed end-user services. The service design dimension serves as a reference to the other domains since the authors believe that a business model design should start with the demand side of a service offering and that customer value
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Fig. 1. STOF business model domains (Bouwman et al., 2008, p. 36).
of the service should be considered the most relevant aspect of the mobile supply: ‘‘Although technology is basically a driver for new innovative services and business models (push-model), from a customer perspective technology is only an enabler. In the latter case technology pull plays a central role, one that [. . .] requires an understanding and elaboration of user requirements” (Bouwman et al., 2008, p. 37). This fits our previous assumption that user-centred research plays a crucial role in developing new services, designing business models and deploying commercial strategies for platform launch (also see Schuurman et al., 2009). Together with pricing, content bundling is regarded as an essential part in the value proposition of mobile service platforms (Prario, 2007). Therefore, content acquisition and bundling should be considered a critical asset for business models. In order to capture value from multi-play services, telecommunications companies and mobile network operators have invested a vast amount of money in 3G licenses since the beginning of the century (Gruber, 2005). More recently, public authorities have started auctioning DVB-H licenses for mobile broadcasting services. For new entrants in these broadcasting markets, rights ownership of premium content functions as a significant competitive advantage for attracting a substantial consumer base and for resolving the chicken-or-egg problem. Since sports content remains a key asset for building audiences to mobile multimedia services, acquiring sports rights has become instrumental to secure a strategic market position and to establish a basis for the sustainable development of mobile multimedia platforms (Boumans, 2005; Boyle, 2004). Owing to the intensified struggle for market share amongst platform owners, however, exclusive live sports rights fees have heavily inflated. In addition, mobile network operators have to compete with deeper-pocketed pay-television providers for the acquisition of live sports rights. Although obtaining live sports rights is a tough challenge from a financial viewpoint, the real challenge for mobile television providers is in overcoming the entry barriers for getting access to value-added content bundles (Geradin, 2005). In addition to the regulatory barriers, which will be discussed later, existing business models of incumbents are hampering new entrants’ access to content. Traditional broadcasters seem somehow reluctant to repurpose content on mobile and internet-based platforms, which are viewed as a threat for their proven business models. Since incumbents fear for a cannibalisation of their businesses by these platforms, they tend to protect their primary markets from new competitors by acquiring all broadcasting rights in the market, even for platforms in which they have no interest to enter themselves. Owing to the strong asymmetry of value between traditional and mobile broadcasting rights and the bundled offer of those rights across different platforms, mobile network operators are facing significant entry barriers to their access to premium content such as live sports (CEC, 2005; OECD, 2005). Because established broadcasters tend to warehouse the rights acquired, market distortions can appear harming other interested parties being unable to bid for rights packages. This tradition of holding back broadcasting rights from new media platforms considerably reduced the amount of rights available to new market entrants, thus hindering them from rolling out their own platforms. This supports earlier findings that bundling denies rivals scale and serves as an effective entry-deterrent strategy in order to preserve market power and to leverage monopolies (Carlton and Waldman, 2002; Nalebuff, 2004; Whinston, 1990). Broadcasters and telecommunications companies are dealing with this situation by increasingly acquiring equity interests in sporting organisations. This way, they aim to secure closer access to and control of broadcasting and merchandising
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rights (Law et al., 2002). However, this ongoing evolution towards a vertically entwined media sports business is likely to have a pernicious effect on the competition for sports rights and the access to sports content. This belief that broadcasters’ ownership of sports clubs might be anti-competitive relies upon the so-called ‘toehold effect’ (Bulow et al., 1999; Burkart, 1995), which claims that companies can confer a huge competitive advantage in an auction when acquiring a toehold (such as an ownership stake in the object being sold). Eventually, this triggers off less competition, lower sale prices for sports rights and less choice for consumers. Previously, competition authorities have blocked BSkyB’s bid for Manchester United to preserve the fair competition for broadcasting rights (Harbord and Binmore, 2000). Besides these bundling and vertical integration strategies for acquiring sports rights, mobile network operators are also facing more regulatory barriers regarding to the exploitation of sports rights (also see Hoehn and Lancefield, 2003). 3. Regulatory barriers for access to sports content Thanks to its growing economic importance, sports became subject to the rules of European Union regulation in 1974. As a consequence, European competition regulations have shaped the conditions for selling and exploiting sports media rights in the upstream broadcasting market while sector-specific media regulations have further imposed restrictions on the exploitation of these rights in the downstream market. Whereas competition regulations aim for establishing open and effectively competitive markets, media regulations envisage securing public access to information. 3.1. Competition regulations In the sports industries, the joint selling of exclusive broadcasting rights is a widespread practice. According to this principle, all broadcasting rights to sporting events are sold centrally by the organiser of the event or by the league to one single broadcaster in each territory for a very long period, covering all exploitation modes (Toft, 2003). By reducing quantity and competition on the supply-side, leagues establish a monopoly in order to maximise joint profits (Cave and Crandall, 2001). Although the exclusive exploitation of media rights in itself does not breach Article 81 of the EC Treaty (safeguarding free competition) as it aims to guarantee the commercial value of the programme, the individual circumstances of selling exclusive rights could trigger reservations regarding compatibility with EU competition regulation (Scheuer and Strothmann, 2004a). In particular, competition questions arise when broadcasters acquire exclusive sports rights for a long period of time and when those rights are bundled in a joint selling agreement leaving no opportunity for other interested parties to cover major sports events (Aghion and Bolton, 1987). The joint sale of sports rights not always parallels general interests since these bundling strategies are considered as price fixing and exclusive access mechanisms limiting sports content choices to consumers and broadcasters. As these exclusivity deals are blamed to impede competition by favouring the incumbent broadcasters and to allow foreclosure of new media providers from competition, this issue has caught attention from competition and public policy authorities, which have defined a number of criteria that should be considered when pooling broadcasting rights. European Commission case law such as the UEFA Champions League decision has accepted the collective sale of sports rights under a number of conditions: (1) broadcasting rights contracts should be concluded for a period not exceeding three years; (2) sports rights should be traded through open and transparent tender procedures giving all interested parties equal opportunities; (3) individual clubs should be granted the possibility of selling individually the rights that the league was not able to sell jointly; and (4) broadcasting rights should be marketed into different packages (television, internet, mobile. . .) to allow several competitors to acquire sports content (Kroes, 2005, 2006; Monti, 2003). This is extremely important since the emergence of mobile platforms and the fragmentation of the demand-side urges for unbundling broadcasting rights in separate windows. This windowing should enable fans to enjoy a wider array of content formats across a diversity of delivery technologies and should allow individual clubs to exploit certain rights themselves. In addition, unbundling enables rights holders and media outlets to benefit from new revenue streams from subscription and pay-per-view services across several access networks (Boyle and Haynes, 2004). These unbundling remedies have resulted in opening the sports rights marketplace for new media operators enabling them to provide appealing content to media consumers. Given that all the broadcasting rights are no longer supplied to a single operator, new media rights are split up in different packages. This should enhance the possibility for more media companies, including those interested in mobile media services, to bid for such content rights. In the UEFA Champions League case for example, it was decided that both the UEFA (in respect to all matches) and the clubs (in respect to matches in which they participate) should have a right to make available internet and mobile (for UMTS services) rights in different packages (Kroes, 2005). Although this process of unbundling media rights allows new media providers to supply sports content via mobile phones, not all obstacles were removed because it seems that the separate packages are still unequally treated by the Commission. In the case of the UEFA Champions League for instance, the Commission has noted that the content could only be broadcast to mobile devices at least five minutes ‘‘after the action has taken place” (Kroes, 2005). However, what is actually meant by the notion ‘action’ remains unclear. Assuming this refers to single game extracts such as a goal or a penalty, our interpretation implies that full matches are excluded from (live) mobile coverage. It is often argued that the length of mobile sports coverage is limited to highlights or single actions because of technical constraints faced by mobile access networks or handsets, and because of concerns about the transmission quality and view-
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ing experience. In contrast, others have stressed that these length restrictions are not related to technical factors but instead driven by the rights holders’ desire to maintain rights value. If the latter is true, for those length restrictions to be justified, it is necessary to prove that mobile rights adversely affect the value of traditional broadcasting rights. As the Commission’s sector inquiry into the provision of sports content over third generation mobile networks (CEC, 2005) has concluded, user experience of mobile sports content fundamentally differs from traditional television coverage owing to usage costs, personalisation of the viewing experience and the length of time that consumers are willing to spend watching the content. Moreover, previous research has demonstrated that mobile television will be used by people having no access to fixed traditional television services while being on the move. Obviously, mobile television should be considered as a complement rather than as a substitute for traditional broadcasting services (e.g. Carlsson and Walden, 2007; Evens et al. 2008; Kholod, 2006). As there is little evidence of direct substitution between traditional and mobile content services, the licensing of mobile sports rights (even for the whole match) should only have a limited effect on the value of other broadcasting rights. Technical concerns about inferior ‘quality of experience’ are also applied to impose an embargo on broadcasting over the World Wide Web. For example, UEFA and the clubs may only provide online video content one hour and a half after the match has finished because live streaming on the Internet would not permit the maintenance of a satisfactorily high quality. However, this technical argument is highly contestable as other major sports events are becoming streamed live without loss of quality and with a delay of no longer than a few seconds. In any case, the uniqueness of sports events makes this embargo less valuable as sports should be experienced live. Therefore, the unequal treatment of innovative exploitation forms makes these new media services less attractive, which may undermine market development and user take-up. Furthermore, both the UEFA and the football clubs have only the right to provide audio and video content via 3G services, which may hold back the provision of sports content over DVB-H networks. Although it is reasonable to assume that no reference was made to DVB-H because this technology was still not widely applied at that time, it should be preferable to formulate the different packages in a technology-neutral manner in order to create the possibility to include UMTS as well as DVB-H coverage in the mobile rights package. As the boundaries between previously distinct technologies – television, internet, mobile etc. – are rapidly blurring and media companies are implementing cross-media strategies, the way of selling sports rights is likely to change in the near future. Instead of carving up their rights for different platforms, the future trend will be selling rights on a platform-neutral basis with packages carved out by time window (live, near-live, highlights and clip rights). The winners of each package then can exploit these packages across various platforms (Pickles, 2007). This implies that an embargo is imposed neither for online unicasting nor for mobile broadcasting. As a result, users can enjoy sports content on all platforms and at any time and place they want. 3.2. Media regulations Given the democratic, integrative and social functions of sports (see e.g. CEC, 2007a; Maguire, 2005; Sewpaul, 2009) as well as the right of the public to (sports) information, media regulations were introduced to guarantee viewers access to events of major importance for society via free-to-air television (Valcke et al., 2009). At the European level, regulations of the audiovisual sector occur by the Television Without Frontiers Directive (TWF Directive) and later the Audiovisual Media Services Directive (AVMS Directive). This directive abandons the idea of regulating different platforms separately instead of a platform-neutral framework. Hence, not the distribution technology but the nature of the service should determine the kind of regulation that is applicable. According to this framework, it is irrelevant whether audiovisual content is spread over cable, satellite, internet or mobile networks. Since the growth of the digital premium content marketplace, concerns have arisen about the consequences of exploiting exclusive broadcasting rights for sports events. Although viewers clearly benefit from these digital applications leading to an increase of channel quantity and consumer choice, analogue households could be denied access to major sports events since these extra services require an additional subscription payment (Aubry, 2000). In the past, viewers were able to watch major sports events on free-to-air television. However, owing to the acquisition of exclusive sports rights by pay-television providers, major sports events might be excluded from free-to-air coverage. This may lead to the so-called ‘siphoning effect’ that occurs when subscription-based platforms carry events that previously were available for free (Noll, 2007). As a result, households unwilling or unable to pay an extra subscription fee could be deprived access to these events. Although a proportion of households will be likely to switch to pay-television platforms owing to the inelastic demand for sports, exclusivity of sports rights may endanger people’s right to information and cultural citizenship (Jeanrenaud and Kesenne, 2006). However, as some sports events are seen as being of heritage importance, i.e. creating a sense of national identity and collective experience, public authorities consider it justified to prevent these events from ‘disappearing behind a decoder’. Therefore, to safeguard the important social role of sport, to prevent the migration of sports events to pay-television and to guarantee the public’s right to information, the major events list mechanism was introduced in the TWF Directive (now AVMS Directive) in 1997. This mechanism allows member states to draw up a list with events, being of major importance for society that can only be broadcast on ‘‘free-to-air television” in order to ensure that a ‘‘substantial proportion” of the public would not be deprived of the possibility of following such events. In the context of mobile television services, however, certain crucial questions remain unanswered. Should mobile television be considered free-to-air television? And does mobile television reach a substantial proportion of the public? According to the AVMS Directive, free-to-air television does not require an additional payment on top of the basic cable fee or the purchase of a decoder. Whether mobile television should be qualified as free-to-air television thus largely depends
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upon the applied business model scenario of the particular mobile television service. A first business scenario allows users to watch mobile television content without paying a subscription fee. According to this advertising-supported service, people are able to watch content freely in exchange of receiving commercial messages. A second scenario could be that mobile content services are included in the regular fixed subscription price formulas allowing users to watch mobile content beside making phone calls or sending text messages. Just as in the first scenario, it can be argued that mobile television can here be considered a free-to-air service. The opposite is true in a third scenario in which users have to pay an additional subscription fee to watch mobile content on top of their regular subscription for voice and messaging services. In this last case, the basic subscription fee can be compared with the basic cable payment. Hence, mobile television should in principle not be seen as free-to-air. However, when comparing the mobile content subscription fee with the basic cable payment and assuming viewers have to pay an extra fee for premium content such as sports events, only the latter should be qualified as paytelevision. To make things more complex, according to Danish regulation, a considerable low payment for mobile content equals a free-to-air service (Castendyk et al., 2008). To conclude, it is difficult to qualify mobile television as a free-to-air or pay-television service nowadays because of the lack of proven business models. Moreover, free-to-air broadcasters need to ensure that a substantial proportion of the public has access to events considered of major importance for society. However, as the AVMS Directive does not contain a definition of the term ‘substantial proportion’, every member state has its own interpretation of this concept. In Austria for example, this means that 70% of the viewers should be reached, in Belgium 90% and in the UK 95% of the households. Virtually, the entire population, or at least a considerable section of it, should have access to the broadcasting of those events. In brief, only broadcasters that reach the specified penetration percentage are allowed to broadcast the listed-events (Scheuer and Strothmann, 2004b). Due to the fact that access to listed-events remains a privilege for ‘‘broadcasters, i.e. linear services that reach a substantial proportion of the public”, the current mechanism fails to provide a fair opportunity to all audiovisual media providers. It is apparent that new media operators such as mobile and internet service providers have a limited penetration and therefore do not fulfil the substantial proportion requirement. UEFA and FIFA have challenged the listed-events mechanism before the European Court of Justice stating that the Belgian and UK lists are not compatible with Community law. As the principle results in a restriction of the way in which the applicants may market their broadcasting rights, the two most important football federations state that those lists of major events infringe their property rights. Moreover, the list of major events mechanism is claimed to restrict the freedom of establishment by preventing new market entrants wishing to acquire exclusive broadcasting rights to major events in order to put themselves on the consumer map. Finally, the scope of the AVMS Directive is limited to broadcasters, thus, excluding mobile network operators of the possibility to broadcast listed-events exclusively on their platform. This does, however, not imply that they are not allowed to bid for packages for those major sports events. After all, the exclusive rights may be attributed to the highest bidder, being a free-to-air broadcaster, a pay-television operator or even a mobile network operator. The only requisite is that the broadcasters, not fulfilling the two criteria ‘free-to-air television’ and ‘reaching a substantial proportion of the public’, cannot broadcast those events exclusively and/or sublicense these rights to free-to-air broadcasters. After all, the different packages should be open for all stakeholders in the communications industry with broadcasters and network operators equally treated. As the relationship between new media, sport clubs and sports rights is likely to intensify over the next decades, it is argued that the success of mobile network services requires open competition for key content such as sports (Boyle, 2004).
4. Discussion Until recently, mobile phones were primarily used for voice calls and text messaging. As data services including ringtones, games and video content are expected to become a major revenue source for mobile operators, the mobile industry is betting on mobile broadcasting as an opportunity to capture consumer value. Although mobile television’s success has been taken for granted, competing standards, high data costs, absence of insight into consumer demands and bargaining stakeholder power are carried as explanations for the slow market development of mobile television in Western Europe. The often overlooked strategic importance of content for designing viable business models has been shown in this article, which is crossdisciplinary in nature. Content bundling forms a critical part of the value proposition to consumers, but access to compelling content is seen as a bottleneck for the development of mobile service platforms. Mobile network operators, aiming to enter the rights market for mobile broadcasting, are facing substantial barriers for acquiring access to content. Since incumbents are protecting their established business models by warehousing rights acquired for mobile services, entry-deterrent strategies have been deployed to foreclose effective competition in mobile television markets. Since business strategies typically bundle exclusive rights that are tied to separate media windows, these restrictions favour interests of incumbents, which prevent new market entrants from purchasing premium content by warehousing content rights. In addition to these business strategies, regulatory provisions are raising barriers for entering the mobile market. While competition regulations address bundling remedies, separate packages are still treated unequally. Furthermore, some rights for new platforms such as DVB-H are still not available because rights agreements fail to consider future transmission technologies. Consequently, these practices limit content availability to mobile platforms, devaluate the appeal of mobile multimedia portals and impede the successful roll-out of these services. Since media regulations exclude mobile service providers the possibility to broadcast listed-events exclusively on their mobile platform, mobile service pro-
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viders face the classical chicken-or-egg problem of the platform creation business: to gain market shares they need premium content, but to gain access to this content, significant market shares are required. The European Commission has tried to encounter some of these problematic issues, but getting access to premium content, in particular sports, remains a huge challenge for platform owners willing to break into the mobile television market. As technological convergence is blurring the boundaries between previously distinct technologies, platform-neutrality, with packages carved out by time window (live, near-live, highlights and clip rights), is generally assumed to establish fair, open and non-discriminatory access to the sports rights market. The winners of each package can then utilise these rights across whatever platform(s) they own. However, this approach still does not rule out the possibility that an incumbent acquires all packages and dominates all sports content platforms. Platform-neutrality therefore does not necessarily provide an adequate answer to the bundling strategies used by established market players. Rather than carving out sports broadcasting rights by time window, which reflects the classical one-sided merchant mode, rights sellers should make their business model fit the networked economics of two-sided platforms. In this mode, platform owners leave full control of the rights entirely to the rights sellers and simply determine buyer and seller affiliation with a common marketplace. This way, platform owners allow content owners, who retain full control over the value proposition including pricing, to establish a direct channel to interact with consumers. 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Telematics and Informatics journal homepage: www.elsevier.com/locate/tele
Access to premium content on mobile television platforms: The case of mobile sports Tom Evens a,*, Katrien Lefever b, Peggy Valcke b, Dimitri Schuurman a, Lieven De Marez a a
Interdisciplinary Institute for Broadband Technology, Centre for Media and ICT (IBBT – MICT), Ghent University, Korte Meer 7-9-11, 9000 Gent, Belgium Interdisciplinary Institute for Broadband Technology, Interdisciplinary Centre for Law and ICT (IBBT – ICRI), Katholieke Universiteit Leuven, Sint-Michielsstraat 6, 3000 Leuven, Belgium
b
a r t i c l e
i n f o
Article history: Received 3 June 2009 Received in revised form 17 November 2009 Accepted 18 May 2010
Keywords: Mobile TV Business model Bundling Content regulation Access Sports
a b s t r a c t As broadcasting sports content has proved to be a popular strategy for driving the growth of the digital premium content marketplace in the past, mobile service operators aim to enter the sports rights market. However, as the markets for live sports broadcasting are still dominated by established broadcasters, mobile network operators are facing significant barriers to access premium content creating bottlenecks in the construction of business models. Therefore, content regulation is seen as essential for the development of mobile television platforms. This article aims to stress the strategic importance of content in the development of sustainable business models for mobile broadcasting services and will discuss the implications of bundling strategies and regulations for the viability of these emerging platforms. Ó 2010 Elsevier Ltd. All rights reserved.
1. Mobile television in the convergence spiral Bringing together two powerful socio-technological developments – enhanced end-user mobility and new kinds of access to media content – mobile digital television is probably among the most prominent technologies that ended up in the convergence spiral of today’s ICT environment (Ahonen and O’Reilly, 2007). Since mobile network operators are facing decreasing average revenue per user due to intensified competition, the entrance of low-usage consumers and regulatory interventions (e.g. termination tariffs and roaming fees restrictions), mobile service providers are seeing revenue opportunities in mobile television propositions (Andersson, 2005; Gruber, 2005; Orgad, 2006; van den Dam, 2006). These developments may affect traditional viewing practices towards a more personalised user experience including the consumption of on-demand mobile content. Moreover, mobile broadcasting technologies challenge established business models by providing an innovative distribution mechanism for content delivery. Consequently, new audiences can be reached while the traditional evening peak time audience can be targeted at other times of the day (Feldmann, 2005; Södergård, 2003; Urban, 2007). Mobile consumer services have not only been granted a crucial role in the further development of the information society (e.g. eEurope 2005 and i2010 action plans), the European Commission also considers mobile broadcasting as a tremendous opportunity to expand Europe’s leadership in mobile technology and to strengthen the internal market for audiovisual services (CEC, 2007b). In order to establish a vibrant ecosystem for mobile television services, the European e-Communications policy has identified three key factors for the industry’s successful market development: (1) technical aspects such as * Corresponding author. Tel.: +32 09 264 68 83. E-mail addresses: [email protected] (T. Evens), [email protected] (K. Lefever), [email protected] (P. Valcke), [email protected] (D. Schuurman), [email protected] (L.D. Marez). 0736-5853/$ - see front matter Ó 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.tele.2010.05.004
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network interoperability and common transmission standards, (2) a favourable regulatory environment conducive to innovation and investment in mobile broadcasting services, and (3) radio spectrum capacity supporting qualitative mobile infrastructure. In addition, the Commission (CEC, 2007b, p. 8) has recognised that ‘‘the successful deployment and uptake of Mobile TV depends crucially on content availability”. As content has proven to be ‘king’ for many new media technologies in the past, it is assumed that premium content, in particular sportscasting, will drive mobile television services (Carlsson and Walden, 2007; Goldhammer, 2006; Orgad, 2009; Shin, 2006). The appeal of sports lies in its unexpected outcome and live experience that can be shared amongst viewers, which is especially the case with major sports events. However, the affordances of mobile television are not limited to major sports; mobile technologies also provide long tail opportunities for niche sports content through the establishment of premium niche sports channels. Furthermore, thanks to the integration of close-ups, player cams and multi-camera perspectives, viewers should be able to personalise their own mobile viewing experience. Finally, sports content provides opportunities for mobile betting revenues while watching sports games on the mobile (Schuurman et al., 2009). Consequently, experts had considered the 2008 sports summer, including the Beijing Olympics and the European Football Championships, as a crucial milestone for consumer uptake of mobile television services (Yun, 2008). Although these events granted a unique opportunity for raising consumer awareness, the predicted massive adoption of mobile television devices has not occurred (yet). Although the Commission has decided to set DVB-H as the mobile broadcasting standard and radio spectrum – released by switching off analogue terrestrial television signals – has been allocated to telecommunications companies for the roll-out of mobile television networks (e.g. in Finland and Italy), entry barriers for access to premium content may partly hamper mobile television’s further breakthrough. In addition to the bundled and tied sale of broadcasting rights, which helps incumbents to deploy effective entry-deterrent strategies, legal barriers (competition and media regulations) might foreclose effective competition in mobile television markets. Hence, this cross-disciplinary article will stress the strategic importance of content in the development of sustainable business models for mobile broadcasting services and will discuss the implications of bundling strategies and regulations for the viability of these emerging platforms.
2. Content issues in designing business models Although the emergence of digital technology has revolutionised the broadcasting ecosystem, the success of new consumer applications such as mobile television services will depend on multiple factors, which go far beyond the technological issues. As Braet and Ballon (2008) argue, the main design choices for framing mobile television business models to be addressed are not predominantly technological in nature, but rather related to the cross-impact of strategic cooperation and competition issues, market expectations and legacy situations. While these critical success factors seem confined to the macro level of supplier related issues, user-centred factors on the micro level are of the utmost importance. Failures of recent technologies such as WAP, DAB or CD-I and the ‘battle of standards’ for VCR (VHS versus Betamax) or the newest DVD-generation (HD-DVD versus Blu-ray) show that the availability of attractive content possibly becomes one of the most crucial factors that determine the success of a new technology (see Bouwman et al., 1994; Bouwman and Christoffersen, 1992; Imberti Dosi and Prario, 2005; Von Löhneysen and Wolff, 2004; Wallace, 1999). The adage ‘content is king’ thus still prevails, especially in an essentially top-down industry as television. Since mobile network operators have established mobile television platforms, the content issue is a major one to tackle while designing appropriate business models. Platforms can be regarded as central elements within the mobile industry architecture. Contrary to the merchant mode, in which intermediaries acquire (digital) goods from sellers and resell them to buyers, multi-sided platforms allow affiliated sellers to sell directly to buyers (Hagiu, 2007; Hagiu and Lee, 2009). While the technical outlook of platforms refers to a hardware configuration, an operating system and a software framework on which a number of services run, business models in platform markets aim to balance interests of all stakeholders to assess ‘‘a strategic fit” (Ballon, 2009). The content issue is typically at stake in multi-sided platform markets, characterised by the presence of distinct markets whose overall performance is derived from the coordination and subsidisation across these markets through a common platform. Consequently, platform owners mediating between content providers and consumers should address the celebrated ‘chicken-or-egg problem’ (Parker and Van Alstyne, 2005). Content producers are reluctant to invest in often expensive new content and applications when a substantial consumer base is not certain yet. Consumers on the other hand hesitate to adopt the new technology owing to the uncertainty about the availability of compelling content. If these two processes co-exist, content suppliers and consumers get stuck in a vicious circle leading to absence of network externalities and incentives for the further development of these platforms (Evans and Schmalensee, 2009). Hence, platform owners should devote much attention to business model design to break this circle by matching the expectations of all relevant stakeholders in order to make money (Rochet and Tirole, 2003). Although service design was often overlooked in earlier business model frameworks focussing on organisational and financial issues (e.g. Timmers, 1998), the strategic importance of content issues in business model design has been recognised by more recent conceptual frameworks. In particular, the STOF business model (see Fig. 1) discusses four interrelated design domains of business models for mobile services, i.e. the service, technology, organisation and finance domains (Bouwman et al., 2008; de Reuver and Haaker, 2009). Within the STOF model, the service domain describes the specific characteristics of the developed end-user services. The service design dimension serves as a reference to the other domains since the authors believe that a business model design should start with the demand side of a service offering and that customer value
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Fig. 1. STOF business model domains (Bouwman et al., 2008, p. 36).
of the service should be considered the most relevant aspect of the mobile supply: ‘‘Although technology is basically a driver for new innovative services and business models (push-model), from a customer perspective technology is only an enabler. In the latter case technology pull plays a central role, one that [. . .] requires an understanding and elaboration of user requirements” (Bouwman et al., 2008, p. 37). This fits our previous assumption that user-centred research plays a crucial role in developing new services, designing business models and deploying commercial strategies for platform launch (also see Schuurman et al., 2009). Together with pricing, content bundling is regarded as an essential part in the value proposition of mobile service platforms (Prario, 2007). Therefore, content acquisition and bundling should be considered a critical asset for business models. In order to capture value from multi-play services, telecommunications companies and mobile network operators have invested a vast amount of money in 3G licenses since the beginning of the century (Gruber, 2005). More recently, public authorities have started auctioning DVB-H licenses for mobile broadcasting services. For new entrants in these broadcasting markets, rights ownership of premium content functions as a significant competitive advantage for attracting a substantial consumer base and for resolving the chicken-or-egg problem. Since sports content remains a key asset for building audiences to mobile multimedia services, acquiring sports rights has become instrumental to secure a strategic market position and to establish a basis for the sustainable development of mobile multimedia platforms (Boumans, 2005; Boyle, 2004). Owing to the intensified struggle for market share amongst platform owners, however, exclusive live sports rights fees have heavily inflated. In addition, mobile network operators have to compete with deeper-pocketed pay-television providers for the acquisition of live sports rights. Although obtaining live sports rights is a tough challenge from a financial viewpoint, the real challenge for mobile television providers is in overcoming the entry barriers for getting access to value-added content bundles (Geradin, 2005). In addition to the regulatory barriers, which will be discussed later, existing business models of incumbents are hampering new entrants’ access to content. Traditional broadcasters seem somehow reluctant to repurpose content on mobile and internet-based platforms, which are viewed as a threat for their proven business models. Since incumbents fear for a cannibalisation of their businesses by these platforms, they tend to protect their primary markets from new competitors by acquiring all broadcasting rights in the market, even for platforms in which they have no interest to enter themselves. Owing to the strong asymmetry of value between traditional and mobile broadcasting rights and the bundled offer of those rights across different platforms, mobile network operators are facing significant entry barriers to their access to premium content such as live sports (CEC, 2005; OECD, 2005). Because established broadcasters tend to warehouse the rights acquired, market distortions can appear harming other interested parties being unable to bid for rights packages. This tradition of holding back broadcasting rights from new media platforms considerably reduced the amount of rights available to new market entrants, thus hindering them from rolling out their own platforms. This supports earlier findings that bundling denies rivals scale and serves as an effective entry-deterrent strategy in order to preserve market power and to leverage monopolies (Carlton and Waldman, 2002; Nalebuff, 2004; Whinston, 1990). Broadcasters and telecommunications companies are dealing with this situation by increasingly acquiring equity interests in sporting organisations. This way, they aim to secure closer access to and control of broadcasting and merchandising
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rights (Law et al., 2002). However, this ongoing evolution towards a vertically entwined media sports business is likely to have a pernicious effect on the competition for sports rights and the access to sports content. This belief that broadcasters’ ownership of sports clubs might be anti-competitive relies upon the so-called ‘toehold effect’ (Bulow et al., 1999; Burkart, 1995), which claims that companies can confer a huge competitive advantage in an auction when acquiring a toehold (such as an ownership stake in the object being sold). Eventually, this triggers off less competition, lower sale prices for sports rights and less choice for consumers. Previously, competition authorities have blocked BSkyB’s bid for Manchester United to preserve the fair competition for broadcasting rights (Harbord and Binmore, 2000). Besides these bundling and vertical integration strategies for acquiring sports rights, mobile network operators are also facing more regulatory barriers regarding to the exploitation of sports rights (also see Hoehn and Lancefield, 2003). 3. Regulatory barriers for access to sports content Thanks to its growing economic importance, sports became subject to the rules of European Union regulation in 1974. As a consequence, European competition regulations have shaped the conditions for selling and exploiting sports media rights in the upstream broadcasting market while sector-specific media regulations have further imposed restrictions on the exploitation of these rights in the downstream market. Whereas competition regulations aim for establishing open and effectively competitive markets, media regulations envisage securing public access to information. 3.1. Competition regulations In the sports industries, the joint selling of exclusive broadcasting rights is a widespread practice. According to this principle, all broadcasting rights to sporting events are sold centrally by the organiser of the event or by the league to one single broadcaster in each territory for a very long period, covering all exploitation modes (Toft, 2003). By reducing quantity and competition on the supply-side, leagues establish a monopoly in order to maximise joint profits (Cave and Crandall, 2001). Although the exclusive exploitation of media rights in itself does not breach Article 81 of the EC Treaty (safeguarding free competition) as it aims to guarantee the commercial value of the programme, the individual circumstances of selling exclusive rights could trigger reservations regarding compatibility with EU competition regulation (Scheuer and Strothmann, 2004a). In particular, competition questions arise when broadcasters acquire exclusive sports rights for a long period of time and when those rights are bundled in a joint selling agreement leaving no opportunity for other interested parties to cover major sports events (Aghion and Bolton, 1987). The joint sale of sports rights not always parallels general interests since these bundling strategies are considered as price fixing and exclusive access mechanisms limiting sports content choices to consumers and broadcasters. As these exclusivity deals are blamed to impede competition by favouring the incumbent broadcasters and to allow foreclosure of new media providers from competition, this issue has caught attention from competition and public policy authorities, which have defined a number of criteria that should be considered when pooling broadcasting rights. European Commission case law such as the UEFA Champions League decision has accepted the collective sale of sports rights under a number of conditions: (1) broadcasting rights contracts should be concluded for a period not exceeding three years; (2) sports rights should be traded through open and transparent tender procedures giving all interested parties equal opportunities; (3) individual clubs should be granted the possibility of selling individually the rights that the league was not able to sell jointly; and (4) broadcasting rights should be marketed into different packages (television, internet, mobile. . .) to allow several competitors to acquire sports content (Kroes, 2005, 2006; Monti, 2003). This is extremely important since the emergence of mobile platforms and the fragmentation of the demand-side urges for unbundling broadcasting rights in separate windows. This windowing should enable fans to enjoy a wider array of content formats across a diversity of delivery technologies and should allow individual clubs to exploit certain rights themselves. In addition, unbundling enables rights holders and media outlets to benefit from new revenue streams from subscription and pay-per-view services across several access networks (Boyle and Haynes, 2004). These unbundling remedies have resulted in opening the sports rights marketplace for new media operators enabling them to provide appealing content to media consumers. Given that all the broadcasting rights are no longer supplied to a single operator, new media rights are split up in different packages. This should enhance the possibility for more media companies, including those interested in mobile media services, to bid for such content rights. In the UEFA Champions League case for example, it was decided that both the UEFA (in respect to all matches) and the clubs (in respect to matches in which they participate) should have a right to make available internet and mobile (for UMTS services) rights in different packages (Kroes, 2005). Although this process of unbundling media rights allows new media providers to supply sports content via mobile phones, not all obstacles were removed because it seems that the separate packages are still unequally treated by the Commission. In the case of the UEFA Champions League for instance, the Commission has noted that the content could only be broadcast to mobile devices at least five minutes ‘‘after the action has taken place” (Kroes, 2005). However, what is actually meant by the notion ‘action’ remains unclear. Assuming this refers to single game extracts such as a goal or a penalty, our interpretation implies that full matches are excluded from (live) mobile coverage. It is often argued that the length of mobile sports coverage is limited to highlights or single actions because of technical constraints faced by mobile access networks or handsets, and because of concerns about the transmission quality and view-
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ing experience. In contrast, others have stressed that these length restrictions are not related to technical factors but instead driven by the rights holders’ desire to maintain rights value. If the latter is true, for those length restrictions to be justified, it is necessary to prove that mobile rights adversely affect the value of traditional broadcasting rights. As the Commission’s sector inquiry into the provision of sports content over third generation mobile networks (CEC, 2005) has concluded, user experience of mobile sports content fundamentally differs from traditional television coverage owing to usage costs, personalisation of the viewing experience and the length of time that consumers are willing to spend watching the content. Moreover, previous research has demonstrated that mobile television will be used by people having no access to fixed traditional television services while being on the move. Obviously, mobile television should be considered as a complement rather than as a substitute for traditional broadcasting services (e.g. Carlsson and Walden, 2007; Evens et al. 2008; Kholod, 2006). As there is little evidence of direct substitution between traditional and mobile content services, the licensing of mobile sports rights (even for the whole match) should only have a limited effect on the value of other broadcasting rights. Technical concerns about inferior ‘quality of experience’ are also applied to impose an embargo on broadcasting over the World Wide Web. For example, UEFA and the clubs may only provide online video content one hour and a half after the match has finished because live streaming on the Internet would not permit the maintenance of a satisfactorily high quality. However, this technical argument is highly contestable as other major sports events are becoming streamed live without loss of quality and with a delay of no longer than a few seconds. In any case, the uniqueness of sports events makes this embargo less valuable as sports should be experienced live. Therefore, the unequal treatment of innovative exploitation forms makes these new media services less attractive, which may undermine market development and user take-up. Furthermore, both the UEFA and the football clubs have only the right to provide audio and video content via 3G services, which may hold back the provision of sports content over DVB-H networks. Although it is reasonable to assume that no reference was made to DVB-H because this technology was still not widely applied at that time, it should be preferable to formulate the different packages in a technology-neutral manner in order to create the possibility to include UMTS as well as DVB-H coverage in the mobile rights package. As the boundaries between previously distinct technologies – television, internet, mobile etc. – are rapidly blurring and media companies are implementing cross-media strategies, the way of selling sports rights is likely to change in the near future. Instead of carving up their rights for different platforms, the future trend will be selling rights on a platform-neutral basis with packages carved out by time window (live, near-live, highlights and clip rights). The winners of each package then can exploit these packages across various platforms (Pickles, 2007). This implies that an embargo is imposed neither for online unicasting nor for mobile broadcasting. As a result, users can enjoy sports content on all platforms and at any time and place they want. 3.2. Media regulations Given the democratic, integrative and social functions of sports (see e.g. CEC, 2007a; Maguire, 2005; Sewpaul, 2009) as well as the right of the public to (sports) information, media regulations were introduced to guarantee viewers access to events of major importance for society via free-to-air television (Valcke et al., 2009). At the European level, regulations of the audiovisual sector occur by the Television Without Frontiers Directive (TWF Directive) and later the Audiovisual Media Services Directive (AVMS Directive). This directive abandons the idea of regulating different platforms separately instead of a platform-neutral framework. Hence, not the distribution technology but the nature of the service should determine the kind of regulation that is applicable. According to this framework, it is irrelevant whether audiovisual content is spread over cable, satellite, internet or mobile networks. Since the growth of the digital premium content marketplace, concerns have arisen about the consequences of exploiting exclusive broadcasting rights for sports events. Although viewers clearly benefit from these digital applications leading to an increase of channel quantity and consumer choice, analogue households could be denied access to major sports events since these extra services require an additional subscription payment (Aubry, 2000). In the past, viewers were able to watch major sports events on free-to-air television. However, owing to the acquisition of exclusive sports rights by pay-television providers, major sports events might be excluded from free-to-air coverage. This may lead to the so-called ‘siphoning effect’ that occurs when subscription-based platforms carry events that previously were available for free (Noll, 2007). As a result, households unwilling or unable to pay an extra subscription fee could be deprived access to these events. Although a proportion of households will be likely to switch to pay-television platforms owing to the inelastic demand for sports, exclusivity of sports rights may endanger people’s right to information and cultural citizenship (Jeanrenaud and Kesenne, 2006). However, as some sports events are seen as being of heritage importance, i.e. creating a sense of national identity and collective experience, public authorities consider it justified to prevent these events from ‘disappearing behind a decoder’. Therefore, to safeguard the important social role of sport, to prevent the migration of sports events to pay-television and to guarantee the public’s right to information, the major events list mechanism was introduced in the TWF Directive (now AVMS Directive) in 1997. This mechanism allows member states to draw up a list with events, being of major importance for society that can only be broadcast on ‘‘free-to-air television” in order to ensure that a ‘‘substantial proportion” of the public would not be deprived of the possibility of following such events. In the context of mobile television services, however, certain crucial questions remain unanswered. Should mobile television be considered free-to-air television? And does mobile television reach a substantial proportion of the public? According to the AVMS Directive, free-to-air television does not require an additional payment on top of the basic cable fee or the purchase of a decoder. Whether mobile television should be qualified as free-to-air television thus largely depends
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upon the applied business model scenario of the particular mobile television service. A first business scenario allows users to watch mobile television content without paying a subscription fee. According to this advertising-supported service, people are able to watch content freely in exchange of receiving commercial messages. A second scenario could be that mobile content services are included in the regular fixed subscription price formulas allowing users to watch mobile content beside making phone calls or sending text messages. Just as in the first scenario, it can be argued that mobile television can here be considered a free-to-air service. The opposite is true in a third scenario in which users have to pay an additional subscription fee to watch mobile content on top of their regular subscription for voice and messaging services. In this last case, the basic subscription fee can be compared with the basic cable payment. Hence, mobile television should in principle not be seen as free-to-air. However, when comparing the mobile content subscription fee with the basic cable payment and assuming viewers have to pay an extra fee for premium content such as sports events, only the latter should be qualified as paytelevision. To make things more complex, according to Danish regulation, a considerable low payment for mobile content equals a free-to-air service (Castendyk et al., 2008). To conclude, it is difficult to qualify mobile television as a free-to-air or pay-television service nowadays because of the lack of proven business models. Moreover, free-to-air broadcasters need to ensure that a substantial proportion of the public has access to events considered of major importance for society. However, as the AVMS Directive does not contain a definition of the term ‘substantial proportion’, every member state has its own interpretation of this concept. In Austria for example, this means that 70% of the viewers should be reached, in Belgium 90% and in the UK 95% of the households. Virtually, the entire population, or at least a considerable section of it, should have access to the broadcasting of those events. In brief, only broadcasters that reach the specified penetration percentage are allowed to broadcast the listed-events (Scheuer and Strothmann, 2004b). Due to the fact that access to listed-events remains a privilege for ‘‘broadcasters, i.e. linear services that reach a substantial proportion of the public”, the current mechanism fails to provide a fair opportunity to all audiovisual media providers. It is apparent that new media operators such as mobile and internet service providers have a limited penetration and therefore do not fulfil the substantial proportion requirement. UEFA and FIFA have challenged the listed-events mechanism before the European Court of Justice stating that the Belgian and UK lists are not compatible with Community law. As the principle results in a restriction of the way in which the applicants may market their broadcasting rights, the two most important football federations state that those lists of major events infringe their property rights. Moreover, the list of major events mechanism is claimed to restrict the freedom of establishment by preventing new market entrants wishing to acquire exclusive broadcasting rights to major events in order to put themselves on the consumer map. Finally, the scope of the AVMS Directive is limited to broadcasters, thus, excluding mobile network operators of the possibility to broadcast listed-events exclusively on their platform. This does, however, not imply that they are not allowed to bid for packages for those major sports events. After all, the exclusive rights may be attributed to the highest bidder, being a free-to-air broadcaster, a pay-television operator or even a mobile network operator. The only requisite is that the broadcasters, not fulfilling the two criteria ‘free-to-air television’ and ‘reaching a substantial proportion of the public’, cannot broadcast those events exclusively and/or sublicense these rights to free-to-air broadcasters. After all, the different packages should be open for all stakeholders in the communications industry with broadcasters and network operators equally treated. As the relationship between new media, sport clubs and sports rights is likely to intensify over the next decades, it is argued that the success of mobile network services requires open competition for key content such as sports (Boyle, 2004).
4. Discussion Until recently, mobile phones were primarily used for voice calls and text messaging. As data services including ringtones, games and video content are expected to become a major revenue source for mobile operators, the mobile industry is betting on mobile broadcasting as an opportunity to capture consumer value. Although mobile television’s success has been taken for granted, competing standards, high data costs, absence of insight into consumer demands and bargaining stakeholder power are carried as explanations for the slow market development of mobile television in Western Europe. The often overlooked strategic importance of content for designing viable business models has been shown in this article, which is crossdisciplinary in nature. Content bundling forms a critical part of the value proposition to consumers, but access to compelling content is seen as a bottleneck for the development of mobile service platforms. Mobile network operators, aiming to enter the rights market for mobile broadcasting, are facing substantial barriers for acquiring access to content. Since incumbents are protecting their established business models by warehousing rights acquired for mobile services, entry-deterrent strategies have been deployed to foreclose effective competition in mobile television markets. Since business strategies typically bundle exclusive rights that are tied to separate media windows, these restrictions favour interests of incumbents, which prevent new market entrants from purchasing premium content by warehousing content rights. In addition to these business strategies, regulatory provisions are raising barriers for entering the mobile market. While competition regulations address bundling remedies, separate packages are still treated unequally. Furthermore, some rights for new platforms such as DVB-H are still not available because rights agreements fail to consider future transmission technologies. Consequently, these practices limit content availability to mobile platforms, devaluate the appeal of mobile multimedia portals and impede the successful roll-out of these services. Since media regulations exclude mobile service providers the possibility to broadcast listed-events exclusively on their mobile platform, mobile service pro-
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viders face the classical chicken-or-egg problem of the platform creation business: to gain market shares they need premium content, but to gain access to this content, significant market shares are required. The European Commission has tried to encounter some of these problematic issues, but getting access to premium content, in particular sports, remains a huge challenge for platform owners willing to break into the mobile television market. As technological convergence is blurring the boundaries between previously distinct technologies, platform-neutrality, with packages carved out by time window (live, near-live, highlights and clip rights), is generally assumed to establish fair, open and non-discriminatory access to the sports rights market. The winners of each package can then utilise these rights across whatever platform(s) they own. However, this approach still does not rule out the possibility that an incumbent acquires all packages and dominates all sports content platforms. Platform-neutrality therefore does not necessarily provide an adequate answer to the bundling strategies used by established market players. Rather than carving out sports broadcasting rights by time window, which reflects the classical one-sided merchant mode, rights sellers should make their business model fit the networked economics of two-sided platforms. In this mode, platform owners leave full control of the rights entirely to the rights sellers and simply determine buyer and seller affiliation with a common marketplace. This way, platform owners allow content owners, who retain full control over the value proposition including pricing, to establish a direct channel to interact with consumers. As in the outright selling scenario the economic benefits for obtaining exclusivity are quite high, high-quality content should be available across multiple platforms in the future (multihoming) because foreclosing a portion of the market by being exclusive will be too costly for the content seller. Similarly, sports rights owners should affiliate to multiple platforms to create more value and extract more profits from consumers. By leaving control over pricing, bundling, advertising etc., platform owners avoid the inherent hold-up problem when contracting with sellers before selling to consumers. Finally, the public’s right to information benefits as consumers get a wider and non-exclusive choice between several platforms for watching their favourite sports content. References Aghion, P., Bolton, P., 1987. Contracts as a barrier to entry. American Economic Review 77, 388–410. Ahonen, T., O’Reilly, J., 2007. Digital Korea. Futuretext, London. Andersson, C., 2005. Mobile media and applications, from concept to cash: successful service creation and launch. Wiley, Chichester. Aubry, P., 2000. The ‘‘Television Without Frontiers” Directive, Cornerstone of the European Broadcasting Policy. European Audiovisual Observatory, Strasbourg. Ballon, P., 2009. Control and Value in Mobile Communications: A Political Economy of the Reconfiguration of Business Models in the European Mobile Industry. Ph.D. Thesis, Vrije Universiteit Brussel.
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